The process by which children form friendships is examined. A theoretical model is formed from an exploratory study in which interactions of previously unacquainted preschool children were compared with interactions of good friends. The goals are to test the extent to which the process variables derived from the theoretical model predict the development of friendship between children; to identify how the development of friendship differs as a function of age; and to develop a simplified observatonal system for the study of children's interactions with peers. The model of friendship formation is empirically derived from detailed coding of the verbal interactions of pairs of children who were observed playing in their homes. Dyads of 48 unacquainted children (16 males, 16 females, and 16 male and female) are observed for two play sessions, one at the home of each member. Half of each set are four to five years of age and half are eight to ten years of age. The outcome measures are designed to determine which pairs succeed in establishing a friendship.